Berlin 2018 – scientific programme

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BP: Fachverband Biologische Physik

BP 39: Focus Session: Complex Contagion Phenomena II (joint session SOE/DY/BP)

BP 39.1: Topical Talk

Friday, March 16, 2018, 09:30–10:00, MA 001

Network reconstruction for the prediction of spreading processes — •Diego Garlaschelli — Lorentz Institute for Theoretical Physics, University of Leiden, The Netherlands

Financial contagion is an epidemic-like phenomenon whereby financial distress can propagate across a network of banks connected by credit relationships, possibly leading to the collapse of the entire system. In order to estimate the systemic risk of financial contagion, the knowledge of the entire interbank network is required. However, due to confidentiality issues, banks only disclose their total exposure towards the aggregate of all other banks, and not their individual exposures towards each bank. A similar problem is encountered in epidemiology. Is it possible to statistically reconstruct the hidden structure of a network in such a way that privacy is protected, but at the same time higher-order properties are correctly predicted? In this talk, I will present a general maximum-entropy approach to the problem of network reconstruction and systemic risk estimation. I will illustrate the power of the method when applied to various economic, social, and biological systems. Then, as a counter-example, I will show how the Dutch interbank network started to depart from its reconstructed counterpart in the three years preceding the 2008 crisis. Over this period, many topological properties of the network showed a gradual transition to the crisis, suggesting their usefulness as early-warning signals. By definition, these signals are undetectable if the network is reconstructed from partial bank-specific information.